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Pediatrics: Offer a range of products

Now that Medicare's competitive bidding program has begun in earnest, HME providers are looking in other directions to supplement lost business. Pediatrics seems like a natural market for disenfranchised providers to serve because it's not focused on Medicare. But that doesn't mean it is without challenges of its own--namely Medicaid.

"Medicaid might look better to those who lost Medicare bids, but there are long payment lapses and big discrepancies in what people are paid," said Craig Bright, president of Bluffton, S.C.-based MedQuip.. "It still can be profitable, but you need to have economy of scale to help you get through long DSOs."

Provider Mala Aaronson, OT/ATP/RTS, with Natick, Mass.-based National Seating and Mobility, estimates that 60% to 75% of the pediatric market is funded by Medicaid. Getting proper coverage under the program can be a challenge for providers, while families may still struggle with co-pays for children with complex medical issues, she said.

"In some cases, the state Medicaid allowable may reduce the overall profit for the items requested," Aaronson said. "In some states, private insurance may cover a percentage of an aid-to-daily living (ADL) product, but Medicaid does not, so even the co-pay for that item may be too much for the family to pay. Generally, a prescription and letter of medical necessity is required for both private insurance and Medicaid, so the delay time doesn't change significantly with Medicaid."

Most children who are receiving complex rehab technology have Medicaid as a primary or secondary funding source, agreed Amy Morgan, pediatric and standing specialist with Lebanon, Tenn.-based Permobil. Still, the program does not recognize that the very young could benefit from power equipment, she said.

"Society and our funding sources have not yet embraced the idea that infants and very young children require independent mobility for appropriate development," Morgan said. "Funding for power wheelchairs for very young children continues to be questioned. However, when a consumer exercises appeal rights, as they should, the equipment is regularly funded by both Medicaid and private insurance programs."

"Myriad tactics have been used to reduce payments," she said. "Some Medicaid programs, without any prior notice or policy changes, started bundling all accessories into base wheelchairs without any change in the reimbursement for the base. This has resulted in unreasonable levels of reimbursement in many cases. As reimbursement has declined in so many areas, the culmination of the cuts is causing suppliers to respond either by limiting the technology they can provide or by making decisions to exit Medicaid and managed care contracts."

'Expandable' market

The prevailing opinion among pediatric product vendors is that HME providers looking to serve the market have opportunities in all disciplines, from ADLs and bath safety to mobility, rehab and respiratory. Ideally, providers should carry products in all categories in order to become a complete pediatric service company, industry specialists say.

Jay Doherty, clinical education manager for Exeter, Pa.-based Quantum Rehab, recommends that providers unfamiliar with pediatrics develop a broad knowledge about all aspects of the market to ascertain all of their needs.

"You need a diverse knowledge base to serve the pediatric population," he said. "You should have one staff member who knows power mobility, one who knows ADLs and one who is good at manual mobility. Families like one-stop shopping. They learn to trust you and want to get equipment from you because you are knowledgeable."

Respiratory providers should take a serious look at pediatrics, Bright added.

"Pediatric respiratory pays on time and provides cash flow instead of waiting for capped rental," he said. "There are some cash items that go hand-in-hand. For instance, children with asthma or a severe cold use an inhaler or nebulizer for treatment. There are products like peak flow meters and pediatric humidifiers that are relatively inexpensive. There are other supplies that go with nebulizers, such as extra cups and tubes--people will pay cash for these items."

The bottom line for HME providers considering pediatrics, Aaronson says, is that patients can be high maintenance and that their welfare is what matters most.

"Children need to be cared for by a large team of people and require adaptive equipment to assist with all activities of daily living, including feeding, bathing and sleeping," she said. "The providers who focus on profit margin often do not offer many of these products so as not to reduce their overall profit. And that is a real disservice to these children and their families."